The Airline industry gives a very exceptional experience to its customers. The transportation service that customers avail is added up with a lot of convenience and effectiveness. The services also include food, entertainment and a hospitable staff. Despite the transportation service provided by other industries too, this industry leads because it saves time. Analyzing the airline industry will tell us more about why some companies are better off than the rest. (Dhamija. Ak, 2009) In the United States, this industry is buffeted by strong forces including many external factors which are increase in the operating cost reduce in the passenger traffic, high prices of fuel and maintenance and also a cut throat competition in terms of prices. Porter’s model has been applied on Virgin Atlantic in this study.
Rivalry Among the Competitors
In terms of competition, the airline industry is more bound to be restricted b the buyer side instead of the supplier side. Resultantly, fliers can be fully pampered. This why a low cost is charged with all services included especially in a case like United stated where intense completion in the airline industry is seen rather it is one of the most competitive industries found in USA. (Sims, 2001)
Many competitors have entered into the market for gaining profit of Virgin Atlantic. Despite that the airline industry does not gain regular profits, it has not stopped other competitors to enter into the market. Thus, the competition is very high. This competition has lead the companies to follow “bigger is better” many companies are forming mergers. (Grant, 2011)
The Bargaining Power of Buyers
Consumers hold a huge power due to greater distribution systems. They have multiple channels through which tickets can be booked. (Dhamija. Ak, 2009) The buying power has greatly impacted Virgin Atlantic because of huge number of choices available in terms of fare. Hence it charges cheaper rates while its business model has been imitated by many other companies. The online system of booking tickets online has given more options to the customers. (Grant, 2011)
The Bargaining Power of Suppliers
In case of an airline industry the supplier power is huge as it is associated with three major inputs which are labor, aircraft and fuel. These are associated with the external environment. For instance the price of fuel may be stimulated with the variation in the global market. Labor has the power to bargain while the airline needs to purchase aircrafts either on leasing system or have its own. (Grant, 2002)
In case of Virgin Atlantic, suppliers of aircrafts are Airbus and Boeing. Other suppliers include those who make spare parts. Taking into consideration that the airline has not many carriers it dominates itself in terms of suppliers, the supplier power is low. In terms of fuel, it uses jet fuel – a premium product whose buyers aren’t many and is taken as a favorable product for the company. (Grant, 2002)
Substitute of Existing Products
There are no such threats of substitutes for Virgin Atlantic because of people’s priorities in West who choose to travel by air. Yet due to the ongoing recession companies are now using other options including virtual meetings, telecommunication and so to avoid travel and thus continue to work. Besides this, people has started to appreciate leisure travel where they want to opt or cheaper choices and cut down their dependency on travel by air only. (Grant, 2002)
Threat Towards the Entry of New Entrants
In an aviation industry, entry and exit barriers are relatively high as huge capital is required to enter into the market. Besides, in this industry the airlines can not exit once they are bound by the regulators as they are often insisted to complete their obligations they have made for the contract. There are also concerns regarding safety, trustworthiness and financial safety. (Dhamija. Ak, 2009) Virgin Atlantic faces a tougher external environment because of which it is hard for the newer entrants to take its place. Yet, once a company has entered into such a business it can rise at its peak but at the same time race underneath too. (Grant, 2011)
Hence, to conclude it can be seen that Virgin Atlantis faces a very challenging environment and also huge competition in its industry. To remain profitable, it is important that it focuses ahead of the industry and gain its position. (Grant, 2011)
References
Dhamija. Ak, (2009). Strategic Management: Porter Analysis for Civil Aviation Industry. Available at: http://akdhamija.webs.com/consultancy/Porter%20Airline%20Industry1.pdf
Sims. Adrian, (2001). A model approach -Generating strategic options by Adrian Sims. The use of models to gain competitive advantage. CIMA insider. Available at: http://www.cimaglobal.com/Documents/ImportedDocuments/ci_sept_01_24-26.pdf
Grant. Robert (2011). Richard Branson and the Virgin Group of Companies in 2007. Available at: http://customwritingpaper.blogspot.com/2011/11/richard-branson-and-virgin-group-of.html
Grant. Robert (2002). Richard Branson And The Virgin Group Of Companies In 2002. Available at: http://www.blackwellpublishing.com/KOLB/downloads/private/grant/virgin.pdf